Last year in this report, we issued the first post in a series focused on transparency. This year we continue, addressing questions we are most often asked.
Public perception often helps form reality, and we care about what you think. Rather than pull the “no comment” card, we’re going to answer critical questions directly. In doing so, we hope you will better understand our positions on various topics and why we do the things we do.
Q. How does Coca-Cola measure its water replenishment for its global sales volume?
A. We measure water replenishment based on projects that safely and sustainably provide water to communities and nature for continued use. Those projects can include safe water, watershed restoration or replenishment and rainwater harvesting, among other locally relevant projects. The amount of water (measured in liters) is then calculated against the volume of our beverage sales made in a given year. For instance, in 2015, our beverage sales volume was about 166 billion liters and our replenish projects yielded 191.9 billion liters of water returned to communities and nature. Note, sales volume is a little higher than our product volume produced in our plants – 151.1 billion liters – due to fountain sales at our customers’ locations that we also account for in our replenish work.
Coca-Cola only counts water replenishment from projects that secure water for communities and/or nature. We have more than 500 community water projects, but approximately 300 of those are focused on water infrastructure, policy, sanitation, or education programs. While these types of projects fulfill a significant need, they do not provide direct water benefits; therefore, we do not count them in our replenishment calculations. In 2015, 248 projects in 71 countries equated to 115% of replenished water. We only calculate replenishment credit for the portions of each project that are directly funded or instituted by the Coca-Cola system. Thus, we do not take any replenishment volume credit for work financed solely by our partners.
Q. When you ‘replenish’ do you put water back into the sources of water your bottling plants get their water from?
A. The answer is sometimes. At each of our manufacturing sites, we obtain water from local sources – either piped to our plants from municipal systems (who source their water from rivers, lakes, reservoirs or groundwater) or abstracted directly by our operations from ground or surface water sources (in some cases we also harvest rainwater and, in a few locations, we take water from the sea).
We treat this water and then use it for manufacturing processes (such as cleaning mixing tanks or in cooling towers) and to produce our beverages. Water leaves the plant in one of two ways: a little more than half of the water (on average) ends up in our products, with the remainder left over from cleaning and other manufacturing processes. Note, we have improved our water use efficiency for 13 straight years, for a total water use reduction per liter of product produced of 27% since 2004.
Our water stewardship policy requires that the remaining water not contained in our products must be properly treated in compliance with applicable law and capable of supporting aquatic life, even if not required by local regulation, before being discharged either directly to the local environment (watersheds) or back through municipal systems. In either case, ultimately the water ends up in the local environment. In most cases, this practice returns about half the water we use to the source from which the water originated.
The remaining water is in our products and it is this finished beverage sales volume that we work to replenish through community water projects. Based on local vulnerabilities and needs, we work with partners to select projects that have the greatest potential benefit and impact to watersheds, communities, and livelihoods. Sometimes projects involve actions that cannot be quantified in terms of replenish but are equally important in some communities, and so we do them too. Working with the local government to raise awareness about household water efficiency and sanitation practices are good examples.
Some replenish projects do indeed directly return water to the source we use while others are outside the watershed our plant uses but are important to help meet needs of local governments, communities and partners. We seek projects that have a direct benefit, can be scaled up to reach more people and parts of an ecosystem, or are easy to learn from and replicate in other places where the challenges are similar. We also focus a lot of our replenish projects where the needs are great and areas where we’ve identified risk through our Source Vulnerability Assessments (SVAs – see below).
You might still wonder about the plants where we do not replenish all the water we use to the source we get water from. At each plant, we require operations to determine the sustainability of the water supply they share with others in terms of quality, quantity, and other issues such as infrastructure available to treat and distribute water (we call this an SVA).
In the SVA, plants first have to demonstrate that their use of water and discharge of water does not have a negative impact on the ability of others to access a sufficient quantity and quality of water. This is a rights-based ‘do no harm’ approach. But even then, some water sources may still be vulnerable in some aspect. Our requirement then mandates that each plant develop and implement a Source Water Protection Plan engaging others to mutually seek solutions. This may result in replenish projects for us or other opportunities.
So while each plant may not replenish all water to its source, all plants work to ensure they do not negatively impact water sources and work with the community on longer term solutions.
Q. Why doesn’t your replenish program cover the water embedded in your products from the cultivation and processing of your agricultural ingredients (your studies showed that a vast majority of your total water footprint is in crops)?
A. We are working toward world-class water resource sustainability in our direct operations and our agricultural ingredient supply chain. There are significant differences between these aspects of our value chain including our level of control and influence, the scale of water use, geography and setting (mostly urban for our plants and mostly rural for agriculture), financial models and incentives, and regulation.
These differences call for a different strategy to achieve the same objective: water resource sustainability.
For our plants, we are taking action directly in our business. For our agricultural ingredients, we have to work through our supply chain. Our relationship starts with our direct suppliers but in most cases these are not cultivators of crops (producers, farmers) or even processors of crops (such as a sugar mill). Just as you buy food from a grocery store or restaurant who buy from suppliers who ultimately buy from farmers, our suppliers are similarly a step in the chain from farm to fork (or bottle, in our case).
As a result, we have to work all the way through our supply chain to ensure responsible water use of farmers producing the ingredients we use. We have expressed our Company’s expectations on sustainable farming practices in our Sustainable Agriculture Guiding Principles (SAGP). Water resource management, namely efficiency, control of pollution, and source water sustainability, are a key part of the SAGPs.
Over the past three years, we have engaged intensely with our key suppliers to bring the SAGP requirements – or equivalent other guidelines – to the farms. Implementing these guidelines in agriculture requires engagement with farmers, creating understanding and embedding behavior change, which can ultimately be audited and verified. This is a long journey and we have made good progress, especially with tea, coffee, lime and sugar, but there is still lots to do.
In summary, we are working in both agriculture and direct operations toward sustainability metrics and goals. We use different approaches that manage the realities and needs of very different business models.
Q. Do you pay third-parties to review and assess your replenish progress?
A. Yes, we pay for this service just as any company or individual pays for a service. We pay a reasonable, customary price for the services rendered: review of data, assessing of programs and projects, and verification of information accuracy. We use respected third parties who remain unbiased in their review and provide critical feedback on our work and progress.
Q. Do you think all companies should work to replenish their water?
A. We think all business should start with understanding their water use, where their water comes from and what risks exist between use and available supply.
Specifically, companies should initially focus on water use in their direct operations by first measuring water use, working towards better efficiency, and ensuring their wastewater and stormwater discharges do not negatively impact the environment. Once they have this foundation, companies should look outside their property line to the watershed they share, upstream into their supply chain and how each manage water, and even downstream where their goods or services are used by others. All parts of this value chain will use some water and likely face challenges.
A business can then consider the risks and opportunities these challenges present and develop a comprehensive strategy to address them.
Our replenish program addresses our finished product sales volume, this is essentially our consumptive use of water, with non-product water being treated and returned to the environment locally. Other business may well find that addressing their consumptive use, in terms of quality and quantity, provides an easily understood and powerful way to motivate their teams, mark progress and gauge the beneficial impact of their actions.
Q. Why do you work with partners and how do you select them?
A. When we step outside of our direct operations to engage on water challenges we are stepping into a shared environment. Water is the ultimate common good and, in any given location, all water users share water supplies and have a shared responsibility for their stewardship. As such, we must partner with those water users, including NGOs and other civil-society organizations that have an interest in water. Not only must we partner but we want to partner as we believe collective action results in greater impact.
These partnerships always start with the local community and government. Both are a critical part of any such water project’s success.
When choosing additional partners we look for those who can bring diverse perspectives, needed expertise and/or additional resources. Whether these partners are other industry, commercial enterprises, farmers, academia, aid and development organizations, or NGOs, we look for those that have a vested interest in the local challenges and a commitment to building long-term solutions.
Q. Are you replenishing at 100% in every geography where you operate?
A. No. Our replenish progress is based on total replenish work globally. We are replenishing at 100% or above in 12 of our 18 business units. In addition, in several countries (Brazil, Mexico, India, China, US, among others) we are replenishing at 100% or above. In other markets, we are still working toward the 2020 goal to replenish 100% of the equivalent water we use back to communities and nature, and are on track to meet it.
Two of our business units are very committed to water replenishment, but face many challenges due to conflict, geopolitical and social issues.
Replenish projects are determined based on vulnerabilities identified through our risk program, requests from local communities, and areas where we have the partnerships and local resources to develop and maintain sustainable programs.
In a few business units where we are not at 100%, the Company is working to replenish in key areas where water stress is highest.
Q. How will Coca-Cola’s water replenishment efforts change now that the Company has met its 2020 goal?
A. Our goal to replenish all the water we use as a system does not end now that we have met this goal. Our sustainability efforts are ongoing. As our business continues to grow, we intend to continue to replenish 100% of the water we use in our beverages and their production. That means that each year we expect to continue to balance the water we use through wastewater treatment and replenishment projects around the world. Maintaining 100% replenishment is something on which our Company and our bottling partners are focused.
Q. Do you work with other companies, even competitors?
A. On water, we do work extensively with other companies including competitors and are proud to do so. Water challenges are shared challenges in any given setting. The sustainability of our common water supplies is a topic we consider to be non-competitive. We compete in the marketplace but know collective action is required in water sustainability. People, communities, ecosystems, farmers, business, everyone needs a sustainable supply of water. In most cases, the action or inaction of any one user of water would be insufficient to holistically address the bigger challenges with water.
In all of our work outside of our plants, we strive to seek, align objectives and ultimately work with partners. This collaboration leverages resources of all partners, allows for bigger projects with bigger impact, and builds momentum hopefully inspiring others to join in. Our many Water Funds we are a part of with The Nature Conservancy and others are a great example. By definition, such funds require the greatest number of water users in a shared watershed combining forces.
As a clear example, PepsiCo, our chief competitor in many markets, is an active partner in our water policy engagement with the 2030 Water Resources Group.
Partnership with other companies goes beyond work on the ground. We are active in several organizations with other businesses that seek to develop and share better practices and discuss challenges and solutions. These include the UNGC’s CEO Water Mandate and the Beverage Industry Environmental Roundtable.
More on Journey
- Release of Chinese Deer into Natural Environment Marks New Step for Nearly Extinct Species
- 5 Keys to Being Fearless: Jean Case Challenges Coca-Cola Scholars to ‘Take Risks, Be Bold and Fail Forward’
- Coca-Cola CEO: 'Progress is Achieved in Partnership, Not in Isolation'
- What Will it Take to Make the World’s Biggest Companies Sustainable?
- Muhtar Kent Reflects on His Coca-Cola Journey and Legacy as Company’s 15th Chief Executive